Locals caught in Dubai property deal gone bad (Complete article below)

Royce Millar and Rick Feneley
July 27, 2009 .
FOR more than 150 years, Geelong Grammar has provided its privileged graduates with the keys to success in an Anglo-dominated Australian society.

But for Old Grammarian classmates and property industry figures Angus Reed and Matt Joyce, some training in doing business in more exotic locations like the United Arab Emirates might have been more useful.

The Age can reveal that the two long-time mates are among four Australians facing a string of charges, including fraud, over a property deal gone bad in Dubai.

Mr Joyce and fellow Australian executive Marcus Lee have been languishing in prison for six months. Mr Reed and an Australian lawyer, Anthony Brearley, are believed to have left Dubai before the police investigation, thereby avoiding jail.

Well-placed sources last night confirmed that Mr Reed and Mr Brearley had been declared "fugitives" in Dubai and would be tried in their absence.

The Age also believes that the James Packer-backed developer Sunland Corporation has both Mr Reed and Mr Joyce in its sights as it prepares civil action to recoup millions it says it lost on the deal.

Important to charges against Mr Joyce and Mr Reed are payments allegedly made by Mr Reed's company, Prudentia, to a bank account in Jersey held by Mr Joyce. Both men are expected to insist that any such payments were unconnected with the Dubai property deal in question.

A source close to Mr Reed says he is deeply upset by his mate's predicament but has not returned to Dubai for fear of being arrested.

One source close to one of the families say the saga has led to tension between the two old mates, a suggestion rejected by a spokesman for Mr Joyce.

Like thousands of their colleagues, Mr Reed and Mr Joyce ventured to Dubai a few years ago in search of riches. The dream turned sour last year for Mr Joyce in particular, when that country's "miracle" property boom proved to be a very burstable bubble.

Until his arrest in January, Mr Joyce had been managing director and Mr Lee a senior executive of Dubai Waterfront, a subsidiary of the state-owned Nakheel Corporation. It is the world's biggest waterfront development.

At the core of the row is the sale in 2007 of a parcel of development land by Dubai Waterfront to Sunland. Mr Reed's Prudentia Investments is believed to have partnered Sunland in the purchase of the waterfront site. But Prudentia sold its share of the project as the boom continued through 2007. Now Sunland has put development of the site on hold.

Sunland has made a formal complaint to Queensland Police and the Australian Competition and Consumer Commission. The Age believes the company names Reed, Joyce and Lee.

Mr Joyce and Mr Lee insist they are innocent. Australian business sources have complained that the two became scapegoats amid the property collapse in Dubai, where "commissions" or kickbacks have been commonplace.

The Dubai prosecutors and Sunland, which has billions at stake in Dubai, see things differently. Sunland has stated publicly that it will seek "civil remedies in respect of the alleged fraud".

It has repeatedly stated it is co-operating fully with the Dubai authorities in its investigation of Mr Joyce and Mr Lee but has denied being behind the police action against them.

Any civil action will be taken in Australia, not Dubai. But in what is shaping up as a bitter stoush, with big-name lawyers such as Robert Richter likely to be throwing the punches, the case is set to throw open a rare window into the opaque world of business and government in a country dominated by its ruler, Sheik Mohammed bin Rashid al-Maktoum.

Mr Reed is well-known in property circles, including as adviser to the Nauru government in the 1990s when it lost a fortune on the Melbourne property market.

Those who know the two men say Mr Joyce is quiet and cautious while Mr Reed is more entrepreneurial and daring. It is counter-intuitive, they say, that Mr Reed is now a free man at home in Toorak while Mr Joyce sweats it out in a Dubai jail.

After a thorough vetting by Mr Reed's lawyers, Prudentia issued a brief written statement to The Age. The lawyers would not allow Mr Reed to be quoted. Instead, a company "spokesman" said: "Some years ago, the Prudentia group, through its Singapore-based subsidiary, was involved in a transaction which we understand is the subject of the investigation by the Dubai authorities.

"The Prudentia group has at all times acted properly and with integrity and is concerned and surprised that there would be any allegations of wrongdoing against representatives of any of the parties involved in the transaction."

Mr Joyce's Melbourne-based lawyer, Martin Amad, restated his client's innocence and questioned Sunland's motives. He said the land sale was a "legitimate business transaction that occurred prior to the global economic downturn. Sunland has subsequently incurred a huge loss on the project and has written down the value of the land substantially".

"Shareholders of Sunland would hope that Sunland exercised due diligence prior to purchasing the land," Mr Amad said.

"After all, they would have their shareholders believe they are an experienced and sophisticated property developer."

He said that, contrary to previous reports, there had never been an allegation of Sunland paying consultancy fees to Dubai Waterfront.

Mr Joyce's wife and three children and Mr Lee's wife are still in Dubai, awaiting the outcome of the fraud trial.

Sunland did not wish to add to the written statement it made to the Stock Exchange last week.

O mindly people consider July 26th (Re-post)

If you’re not careful, who knows what might happen???

First, some numbers for you to chew on, and then, somewhere in the middle of this post, an analysis that may interest some readers.

After losing heavily (-29%) over 21 trading sessions up to July 13th, the DFMGI has bounced back 12.53% over only 8 sessions. Today the index closed at the day’s high, up 5.23%.

Indepth: AlBraikan and the SEC (Re-post)

Hazem Khalid Al-Braikan, CEO of Al Raya Investment Company, was found shot dead at his home. A policeman, speaking on condition of anonymity, outside his home said the death appeared to be a suicide. Police were at Braikan’s house at al-Rawda, where the body was still inside at 12pm local time. His death has been received in disbelief as suicide was never before been a solution to financially stressful situations in Kuwait, or in the Gulf.

“It’s very sad news. This crisis has seen a lot of people in the Gulf and across the world fall from grace, and each person is different in terms of their ability to handle pressure.”

- Mohammed Yasin, CEO Shuaa Securities

During the past week, a civil lawsuit against Hazem Khalid Al-Braikan sent shockwaves through the Middle East investment community. Al-Braikan, in his 30’s, was chief executive of Al-Raya Investment Company, which is 10 percent owned by Citigroup. He was a familiar figure at the higher spectrum of Middle Eastern financial functions, always dressed in traditional attire and speaking impeccable English. He was considered a highly respected member of the Kuwaiti money management world.

The U.S. Securities and Exchange Commission said in papers filed in Manhattan federal court that Al-Braikan and entities linked to him in Kuwait and Bahrain earned more than $5 million from well-timed trades in Harman International Industries Inc and Textron Inc.

“We have had a team of six or seven people working around the clock for the last couple of days to gather evidene… This is pretty brazen misconduct.”

- Scott Friestad, SEC enforcement division official

The SEC began an investigation soon after learning about a takeover hoax last Monday (20 July 2009) at the same time that the markets and media outlets began spreading the reports

“Defendants engaged in a deceptive scheme to profit by trading around the fraudulent offers to acquire Harman International and Textron… [Defendants] profited from amassing large positions in stocks and options in the two companies.”

- excerpt from SEC Letter

Harman shares soared that Monday following several media outlets report that a private investment firm called ‘Arabian Peninsula Group’ planned to buy it at almost double its market price. The incident was similar to a phony offer for Textron in April from a UAE-Kuwaiti consortium.

News agencies received a one-page fax on Sunday (one day prior to the spike in prices) announcing the purported Harman bid. The fax number was traced and happens to originate in a Kuwaiti area code. Although the SEC did not specify who sent the fax, or who spread news on the fake bid for Textron.

Al-Braikan was known for being open to discussing market rumors with reporters, a common practice in Kuwait, where businesspeople and traders sometimes leak sensitive company details or questionable information that can move stocks on a market that has no financial regulator.

“There is a major scoop coming… Don’t tell anyone but I will give you a great scoop…”

- Al Braikan speaking to a reporter prior to the imminent bid for Textron before the April hoax.

The SEC claimed that Al-Braikan was engaged in “an aggressive trading strategy” of buying Harman stock and call options in the four trading days before the phony tender offer. Al-Braikan and United Gulf Bank liquidated their entire positions in Harman and requested the money in their Citigroup accounts wired to them.

On Monday, Al-Braikan sold his entire position of 341,000 shares of Harman common stock, including 50,000 shares bought that day, for a profit of about US$1.15 million according the SEC statement. He continued to liquidate his position by selling his entire position of 500 call contracts for a profit of nearly US$29,000, the lawsuit said. During the same day United Gulf Bank sold its entire Harman position for more than $400,000.

REPORTER: Is the SEC cracking down on stock hoaxes?

“I would not tell you it has become a heightened issue… It has always been an issue of concern.”

- Mary Schapiro, SEC Chairman

During the April 9th Textron stock debacle KAMCO made about US$377,000 in illegal profits after spreading false reports about an offer to take over the company. While Al-Raya made illegal profits of about US$147,000 on Textron.

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• U.S. Sues Investors About Profits Made From Fake Takeover Rumors (nytimes.com)

Oman's PDO tenders $7 bln of oil contracts

State-run Petroleum Development Oman (PDO) will close the qualification process on Tuesday for companies interested in contracts worth up to $7 billion for work on its oilfields, according to PDO's website.

PDO is Oman's largest oil producer and an affiliate of Royal Dutch Shell. It pumped 633,000 barrels per day of Oman's crude and condensate output of 757,000 bpd in 2008.

The Gulf Arab state is a small independent producer, but its crude oil forms part of the benchmark price for around 12 million barrels per day (bpd) of crude exports from Middle East producers to Asia.

Global's GCC Islamic Index–Weekly Brief dated July 23, 2009 (PDF)

Global's Qatar Weekly Market Report - July 23, 2009 (PDF)

Global's Palestine Weekly Market Report - July 23, 2009 (PDF)

Global's UAE Weekly Report - July 23, 2009 (PDF)

Global's GCC Weekly Market Report – July 23, 2009 (PDF)

Iraq plans roadshow for second oil auction

Iraq's Oil Ministry will hold a roadshow in Istanbul next month to brief international companies on a list of oil and gas fields to be offered later this year in a second licensing round for long-term development contracts, according to a statement posted on the ministry's website on Sunday.

"The roadshow will be in Istanbul on Aug. 25, 2009 at the Intercontinental Hotel," the ministry said in a statement issued by the Petroleum Contracts and Licensing Directorate (PCLD).

The PCLD issued a final list of fields in its second post-war licensing round, listing 10 projects - including the prized and largely untapped fields of Majnoon and West Qurna phase II. The new list excluded the southern Siba gas field.

Discounts keep Atlantis Hotel's rooms full

Guests are almost filling the Atlantis in Dubai as a result of the resort’s aggressive advertising of value deals, despite the ailing state of the emirate’s hotel sector, its top executive says.

When the US$1.5 billion (Dh5.5bn), 1539-room resort opened on the man-made Palm Jumeirah last September, success seemed assured. The Atlantis celebrated its opening two months later with a $20 million launch party, attended by a host of celebrities including the actor Robert de Niro, singer Janet Jackson and business magnate Sir Richard Branson, to name but a few.

But shortly afterwards, the economy soured considerably. The Atlantis, along with the rest of Dubai’s hotel industry, was hit hard by a slowdown in global tourism, with falling revenues exacerbated by the ever-increasing number of hotels opening for business. “There has been no question that the economic environment has been tough,” says Alan Leibman, the president and managing director of Kerzner International Management. Kerzner International developed the Atlantis with Istithmar, an investment arm of Dubai World.

National Bank Abu Dhabi plans Europe property fund

The National Bank of Abu Dhabi (NBAD) is preparing to launch a fund with a European partner that will offer high-interest loans to European property companies that are struggling to secure funding because of the global squeeze on credit.

NBAD and Evans Randall, a British investment bank and private equity group, will initially invest about US$20 million (Dh73.4m) of their own capital to seed the new European Real Estate Mezzanine Opportunity Fund, said Shiraz Habib, the head of product development at NBAD’s investment banking group.

The fund would sell 80 per cent of its initial capital to investors, Mr Habib said.

Pay up or go to jail, banks tell debtors

An increasing number of banks in the UAE are using heavy-handed tactics to collect debts, even when the sums involved are as little as Dh16, customers say. Meanwhile, the banks say it is happening because the country has no real structure for collecting bad debts.

Junaid Malik thought that it happened only to those who had lost their jobs and could no longer afford to pay off debt.

But earlier this month, after missing his monthly credit card payment, he received the call – a collections agent from his bank threatening him with jail if he did not immediately pay what he owed.

Saudi shares advance 2.8% led by Sabic, Al-Rajhi Bank

Saudi Arabia's shares rose on Saturday, led by Saudi Basic Industries. and lender Al-Rajhi Bank, after stocks in the US and Europe gained for a second week and oil reached a three-week high.

Saudi Basic Industries, the world’s largest chemicals maker by market value, climbed as much as 7%. Al-Rajhi led bank stocks higher, gaining as much as 3.1%. Saudi Telecom, the Arab world’s largest, added up to 3.4%.

The Tadawul All Share Index rose as much as 2.79% to 5,828.56 in Riyadh, bringing its gain this year to 21%. It slumped more than 50% in 2008 as the price of oil, the country’s biggest export earner, declined.

Kuwait's Al-Raya denies SEC violations

Kuwait's Al-Raya Investment Co said on Saturday it has committed no violations after the U.S. Securities and Exchange Commission sued its CEO financier Hazem Khalid al-Braikan over suspicious stock trades.

"The board of directors of Al-Raya Investment Company has reviewed all pending issues related to the civil lawsuit against it, its chief executive and other companies by the SEC," Al-Raya said in a statement obtained by the news agency Reuters.

"The board ... confirms the correctness of these dealings made by the CEO on behalf of the company," added the company, which is 10 percent owned by Citigroup Inc.